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1 2 3 4 5 6 7 IN THE SUPERIOR COURT FOR THE STATE OF WASHINGTON IN AND FOR KING COUNTY 8 PATRICK COLACURCIO, individually and NO. 19-2-33469-0 SEA 9 on behalf of all others similarly situated, CLASS ACTION COMPLAINT FOR 10 Plaintiff, v. VIOLATION OF WASHINGTON STATE SECURITIES ACT, BREACH OF 11 INSIGHT VENTURE PARTNERS VII, L.P., FIDUCIARY DUTY, AND UNJUST a Cayman Islands limited partnership; ENRICHMENT 12 INSIGHT VENTURE PARTNERS (CAYMAN) VII, L.P., a Cayman Islands 13 limited partnership; INSIGHT VENTURE PARTNERS VII (CO-INVESTORS), L.P., a 14 Cayman Islands limited partnership; INSIGHT VENTURE PARTNERS 15 (DELAWARE) VII, L.P., a Delaware limited partnership; INSIGHT VENTURE 16 PARTNERS COINVESTMENT FUND II, L.P., a Delaware limited partnership; 17 INSIGHT VENTURE ASSOCIATES VII, L.P., a Delaware limited partnership; 18 INSIGHT VENTURE ASSOCIATES VII, LTD., a Cayman Islands limited company; 19 INSIGHT VENTURE ASSOCIATES COINVESTMENT II, L.P., a Delaware 20 limited partnership; INSIGHT VENTURE MANAGEMENT, LLC, a Delaware limited 21 liability company; INSIGHT HOLDING GROUP, LLC, a Delaware limited liability 22 company, and RYAN HINKLE, Defendants. 23 TOUSLEY BRAIN STEPHENS PLLC COMPLAINT - 1 1700 Seventh Avenue, Suite 2200 Seattle, Washington 98101 4820-9436-4079, v. 2 TEL. 206.682.5600 FAX 206.682.2992 1 Plaintiff Patrick Colacurcio (“Plaintiff”) brings this action individually and on behalf of 2 a nationwide class consisting of individuals and entities in the United States that held shares of 3 stock in Smartsheet Inc., a Washington Corporation (“Smartsheet”), and sold those shares in a 4 tender offer in June and July of 2017. 5 INTRODUCTION 6 1. This action arises out of Defendants’ role in the purchase of Plaintiff’s shares of 7 Smartsheet stock, and in the purchase of similarly situated investors’ shares of Smartsheet 8 stock, during a tender offer in June and July 2017. 9 2. Plaintiff and the proposed class were all investors in the tech startup software 10 company Smartsheet and held stock in Smartsheet before Smartsheet went public. 11 3. In June and July 2017, Defendants Insight Venture Partners VII, L.P., Insight 12 Venture Partners (Cayman) VII, L.P., Insight Venture Partners VII (Co-Investors), L.P., Insight 13 Venture Partners (Delaware) VII, L.P., and Insight Venture Partners Coinvestment Fund II, 14 L.P. (collectively the “Private Equity Fund Defendants”) made a tender offer to Smartsheet’s 15 stockholders (“2017 Tender Offer”). At the time, Smartsheet was a private company, and its 16 shares were not traded on any public securities exchange. Smartsheet’s shareholders, including 17 the Plaintiff, tendered 6,477,843 shares in total in the 2017 Tender Offer at a price of $8.3035 18 per share. The Private Equity Fund Defendants bought 90 percent of those shares. 19 4. The other Defendants controlled the Private Equity Fund Defendants. The 20 Private Equity Fund Defendants, together with Insight Venture Associates VII, L.P., Insight 21 Venture Associates VII, Ltd., Insight Venture Associates Coinvestment II, L.P.; and Insight 22 Venture Management, LLC, are collectively referred to below as “Insight Partners,” which is 23 TOUSLEY BRAIN STEPHENS PLLC COMPLAINT - 2 1700 Seventh Avenue, Suite 2200 Seattle, Washington 98101 4820-9436-4079, v. 2 TEL. 206.682.5600 FAX 206.682.2992 1 the way they refer to themselves publicly.1 References to “Defendants” herein refers to all 2 Defendants named in this action. 3 5. Just five months after the 2017 Tender Offer in December 2017, Smartsheet 4 filed a confidential S-1 registration statement with the United States Securities and Exchange 5 Committee (“SEC”), seeking approval for an initial public offering (“IPO”). In April 2018, 6 Smartsheet went public, and is now worth over $1 billion, and is trading in excess of $40.00 per 7 share, more than four times the 2017 Tender Offer price. 8 6. At the time Defendants made the 2017 Tender Offer, Smartsheet was already 9 forming plans for an IPO. Defendant Ryan Hinkle was a both a member of Smartsheet’s Board 10 of Directors, and a Managing Director of Insight Venture Management, LLC (dba Insight 11 Venture Partners). He also led Insight Partners’ investment in Smartsheet. Defendant Hinkle 12 and Defendants, through their connections with the Smartsheet Board of Directors, knew 13 material, non-public information about Smartsheet’s plans to go public. 14 7. Defendants failed to disclose this material, non-public information about 15 Smartsheet’s plans to go public in their tender offer documents. 16 8. Plaintiff and the putative class tendered over 6 million shares, for millions of 17 dollars less than the stock was worth then or today. By tendering stock, Plaintiff and the 18 putative class lost the substantial increase in the stock value gained when the stock was sold on 19 the public market. By this lawsuit, Plaintiff seeks to hold Defendants responsible for this 20 disparity and loss. 21 22 23 1 See Insight Partners, https://www.insightpartners.com/ (last visited Oct. 31, 2019). TOUSLEY BRAIN STEPHENS PLLC COMPLAINT - 3 1700 Seventh Avenue, Suite 2200 Seattle, Washington 98101 4820-9436-4079, v. 2 TEL. 206.682.5600 FAX 206.682.2992 1 9. Through their misconduct, Defendants violated numerous duties, including, but 2 not limited to duties owed as a corporate director and duties owed under the Washington State 3 Securities Act. Plaintiff brings this lawsuit on his behalf and on behalf of all similarly situated 4 individuals and entities as members of a proposed plaintiff class pursuant to CR 23(b)(2) and 5 (3). Plaintiff and the putative class seek relief for damages suffered as a result of 6 misrepresentations and omissions of material facts in connection with the tender offer purchase 7 of nearly $55 million in securities, orchestrated by Defendants. Plaintiff and the putative class 8 seek relief under the Washington State Securities Act, RCW 21.20.010 et seq., and Washington 9 common law. 10 PARTIES 11 10. Plaintiff Patrick Colacurcio is an individual residing in King County, 12 Washington. Plaintiff has been an investor in Smartsheet from 2005 to present and sold shares 13 to Defendants in the 2017 Tender Offer. 14 11. A chart showing the relationships among the Defendants is attached as 15 Exhibit 1. 16 12. The Private Equity Fund Defendants Insight Venture Partners VII, L.P., Insight 17 Venture Partners (Cayman) VII, L.P., Insight Venture Partners VII (Co-Investors), L.P., Insight 18 Venture Partners (Delaware) VII, L.P., and Insight Venture Partners Coinvestment Fund II, 19 L.P. are private equity funds that invest money from outside investors. They are exempt from 20 registration with the SEC under Regulation D of the Securities Act of 1933. These Private 21 Equity Fund Defendants actually purchased the shares that Plaintiff and the putative class 22 tendered in the 2017 Tender Offer. 23 TOUSLEY BRAIN STEPHENS PLLC COMPLAINT - 4 1700 Seventh Avenue, Suite 2200 Seattle, Washington 98101 4820-9436-4079, v. 2 TEL. 206.682.5600 FAX 206.682.2992 1 13. Defendant Insight Venture Partners VII, L.P. Defendant Insight Venture 2 Partners VII, L.P. is a limited partnership organized and existing under the laws of the Cayman 3 Islands, with an office located in the Grand Cayman, Cayman Islands. Insight Venture Partners 4 VII, L.P. is a private equity fund that invested in Washington Corporation Smartsheet, made the 5 2017 Tender Offer, and bought shares of Smartsheet stock from Plaintiff in Washington and the 6 putative class during the 2017 Tender Offer. 7 14. Defendant Insight Venture Partners (Cayman) VII, L.P. Defendant Insight 8 Venture Partners (Cayman) VII, L.P. is a limited partnership organized and existing under the 9 laws of the Cayman Islands, with an office located in the Grand Cayman, Cayman Islands. 10 Insight Venture Partners (Cayman) VII, L.P. is a private equity fund that invested in 11 Smartsheet, made the 2017 Tender Offer, and bought shares of Smartsheet stock from Plaintiff 12 in Washington and the putative class during the 2017 Tender Offer. 13 15. Defendant Insight Venture Partners Coinvestment Fund II, L.P. Defendant 14 Insight Venture Partners Coinvestment Fund II, L.P. is a limited partnership organized and 15 existing under the laws of the State of Delaware, and with a principal place of business located 16 in New York, New York. Defendant Insight Venture Partners Coinvestment Fund II, L.P. is a 17 private equity fund that invested in Smartsheet, made the 2017 Tender Offer, and bought shares 18 of Smartsheet stock from Plaintiff in Washington and the putative class during the 2017 Tender 19 Offer. 20 16. Defendant Insight Venture Partners VII (Co-Investors), L.P. Defendant Insight 21 Venture Partners VII (Co-Investors), L.P. is a limited partnership organized and existing under 22 the laws of the Cayman Islands, with an office located in the Grand Cayman, Cayman Islands. 23 Insight Venture Partners VII (Co-Investors), L.P. is a private equity fund that invested in TOUSLEY BRAIN STEPHENS PLLC COMPLAINT - 5 1700 Seventh Avenue, Suite 2200 Seattle, Washington 98101 4820-9436-4079, v. 2 TEL. 206.682.5600 FAX 206.682.2992 1 Smartsheet, made the 2017 Tender Offer, and bought shares of Smartsheet stock from Plaintiff 2 in Washington and the putative class during the 2017 Tender Offer. 3 17. Defendant Insight Venture Partners (Delaware) VII, L.P. Defendant Insight 4 Venture Partners (Delaware) VII, L.P. is a limited partnership organized and existing under the 5 laws of the State of Delaware, and with a principal place of business located in New York, New 6 York.